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Functional Beverages Rounding into Form


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Manufacturers are flooding retailers with a wide array of healthy beverage options.

Juicers, blenders and at-home soda makers are some the hottest housewares of the moment. Health advocates are using these gadgets to mix up homemade beverages packed with fruits, veggies and seeds. However, for many consumers convenience is at a premium and ready-to-drink versions of these healthy, functional beverages are heating up retailers’ cold cases as well.

The functional beverage category is well known for making a strong connection with consumers and retailers alike. Industry observers say that with a strong social media presence, positive customer relations and samplings—in-store as well as at athletic events and music festivals—“the little engines that could” have made a name for themselves in the mainstream marketplace.

Products such as coconut water, bottled fresh juices and smoothies, sparkling kombucha (an effervescent fermentation of sweetened tea), ready-to-drink teas and water enhancers continue to garner consumers’ curiosity. According to observers, the functional beverage category is expected reach $18 billion in sales in the next two years.

“I don’t think it’s a trend by any means. It just makes sense to drink something that will be beneficial to one’s overall health and well-being,” says Chris Reed, founder and CEO of Reed’s. The Los Angeles-based company manufactures a variety of functional beverages and recently married the kombucha and coconut water trends with the addition of the Coconut Water Lime flavor to the Kombucha Culture Club product line.

Of all the segments in the functional beverage category, coconut water has had the most mainstream penetration, observers say. According to Mintel, the number of coconut water product introductions more than quintupled with 540%-plus growth in the past five years.

“Coconut water contains naturally high levels of electrolytes, including potassium, calcium and magnesium, which have made it popular as a sports drink for natural foods consumers,” says Jonny Forsyth, global drinks analyst at Chicago-based Mintel. “Coconut water is doing particularly well in the U.S. because both sports recovery drinks and vitamin-enhanced waters are well-established, meaning that people already buy into the benefits of electrolytes in a beverage.”

Observers say that in the past year more than 60 brands entered the coconut water space. Since 2009 it is estimated that the category has gone from $60 million in sales and is now approaching half a billion dollars. “The sales are there, consumers are responding and coconut water has fully emerged as a leader with staying power in the functional beverage category,” says Arthur Gallego, director of corporate communications for New York-based Vita Coco.

While adults are buying into the benefits for themselves, those with children are also looking to get their kids drinking healthier as well. In June, Vita Coco unveiled Vita Coco Kids, a functional children’s beverage for children aged two to eight. “Vita Coco attracts a very health conscious, trend-aware consumer, specifically young women,” says Gallego. “As these women become mothers, we wanted to create a product that would address their concerns as parents while filling a void in the children’s beverage category.”

Made with 50% coconut water and 50% filtered water and natural flavors, Vita Coco Kids is packaged in a Tetra Pak container and features an attached straw and simple straw insertion for children to enjoy. The kids line will be available in Apple Island, Paradise Punch and Very Cherry Beach flavors.

With so many hydration options it may be easy to forget about water, but many manufacturers remain committed to good ole H2O. A by-product of the premium water category, water enhancers are bringing customization to the water category.

“We define a water enhancer as a liquid or powder concentrate that adds flavor and enables the consumer to customize their beverage with the squeeze of a bottle,” says Bill McKay, founder and CEO of Phoenix-based Ecosentials, maker of the Vitamin Squeeze brand. “A consumer’s life is customizable and we believe they should have that freedom with their beverages too.”

Vitamin Squeeze is an all-natural multi-vitamin powder water enhancer with natural ingredients, vitamins C, B and D and electrolytes, zinc and chromium. Vitamin Squeeze Powder Water Enhancers are available in three varieties: Multi-Vitamin, Energy and Weight Control, with a bevy of flavors.

New York Spring Water offers its VBlast product line which features a liquid water enhancer contained in its proprietary vitamin preserving cap. The vitamins are stored in the cap in a concentrate, not diluted in the water where they can, over time, lose potency. Consumers choose when they want to release the liquid vitamins into the pure spring water. VBlast is available in a variety of functional flavors, says Luke Zakka, owner and vice president of operations of the Halcott Center, N.Y.-based company.

Wisdom Natural Brands offers a line of Sweet Leaf Liquid Stevia Sweet Drops, made with stevia leaf extract and natural flavors. The drops are available in 17 flavors and come in a dropper bottle. Jim May, founder and CEO of the Gilbert, Ariz.-based company says stevia is leading the way to natural, better-tasting beverages. “Our products generate and promote better health and well-being,” he says.

Boosting sales
Observers say that shelf presentation can be just as valuable as taste and nutritional attributes when trying to generate sales. “Vertical brand blocking is crucial—from the singles all the way to the multiserve, it’s a very easy way for consumers to shop a brand,” says Greg Fleishman, chief marketing officer for Sambazon, a manufacturer of fresh juice and smoothie blends, based in San Clemente, Calif. “It’s such a simple thing to do but it often does not happen the way that we think it should.”

Sambazon is also putting a great deal of effort behind driving availability on its core set of products. “We feel like we’re covering all the hottest trends and having our SKUs represented is a way for everyone to win—the retailer, the consumer and Sambazon as a company,” says Fleishman.

Along with presentation, location is important as well. Primary shelf space with multiple points of distribution, especially the quick serve and healthy beverage sets, are key to the success of a retailer’s functional beverage category. Brook Eddy, founder of Boulder, Colo.-based Bhakti Chai adds that a good way to increase sales and trial is with secondary placement.

Even with prime shelf space and secondary locations, if consumers do not know the benefits of a certain beverage they will likely not buy it. That is where the need for education comes in—for consumers as well as retailers. Zoe Sakoutis and Erica Huss, founders of New York-based BluePrint Cleanse, maker of juice cleanses, say they invest heavily in educating retailers and consumers in-store with their brand education team.
“The concept of raw, cold pressed juices is still relatively new so it requires a lot of knowledge distribution,” they say.

A domestic watershed
Premium water is going domestic and NY2O is leading the way—from Upstate New York into the heart of Manhattan and across the nation.

NY2O source water is the 100% mountain water that is collected in the seven reservoirs that are constitutionally protected by New York State. These reservoirs are spread across an environmentally protected region of more than 2,000 square miles ranging from the Catskills Mountains to the fringes of the Adirondack Park.

“It is an aspirational brand with no clear target category,” says Elias Slubski, president of Greenburgh, N.Y.-based New Dutch Water Corp., bottler of the NY2O brand. “New York has the best water to represent America’s entry into the premium water category.”

With an architect-designed bottle featuring a unique handgrip and band groove for promotional use, NY2O instantly differentiates itself from its imported competition, adds Slubski.

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